Escrow ArrangementsTypes of Software Escrow Arrangements
Types of Software Escrow Arrangements
We provide flexible escrow solutions designed to protect investments in software applications and intellectual property. Our source code escrow agreements are designed to leverage today’s technology to support the way you work.
Listed below are the types of escrow arrangements our software escrow agents offer to clients.
Single Beneficiary Escrow Arrangement – Our Single Beneficiary Escrow Agreement is designed for (1) Software Vendor and (1) Licensee aka (“Beneficiary”) whereby, the Beneficiary is designated as the recipient of the Escrow Materials upon the occurrence of a Release Condition. This type of Agreement is often recognized as a conventional three-party agreement.
Multi-Beneficiary Escrow Arrangement – Our Multi-Beneficiary Escrow Agreement enables a Software Vendor to enroll multiple Licensees aka (“Beneficiaries”) to one Master Agreement, rather than establishing a Single Beneficiary Agreement for each unique Licensee. It is designed for (1) Software Vendor and multiple Licensees.
Multi-Vendor Escrow Arrangement – Our Multi-Vendor Agreement enables a Licensee aka (“Beneficiary”) to enroll multiple Software Vendors to one Master Agreement, rather than establishing a Single Vendor Agreement for each unique Software Vendor. It is designed for (1) Licensee and multiple Software Vendors.
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When Do You Need a Software Escrow Company?
Software escrow agreements may be pricey and may not be appropriate for every transaction. This is why it’s critical to base your decision on facts when deciding whether to include software escrow in a contract. While every arrangement is unique, there are a few things to keep in mind when evaluating whether or not a software escrow is necessary in the first place.
You must first consider the risks involved with the licensor or software developers and the actual licensing provided with the software itself.
- It is evident that the licensor is seeing a deterioration in their business outlook due to financial instability or insolvency.
- Reduction in the frequency or end of software maintenance and support the licensor is providing.
- The licensor no longer provides software application updates.
- Looming possibility of contract violation from the licensor.
Licensing & Software Considerations
- Is the software critical to the expansion of the licensee’s company?
- Is the availability of this particular software technology difficult to get via competing vendors?
- Does the software product have an impact on or impacting stakeholders of the licensee?
- Is the software being considered for a technology escrow account, required for the licensee’s business continuity planning and operations?
- Will managing the software in-house create more significant risks than rewards?
A software escrow may be a wise decision if, after considering the reasons mentioned, the parties conclude that the advantages of having the escrow materials securely kept with a third-party escrow agent are more significant than the costs.
Recognizing these risks will help you gauge if establishing a software escrow agreement with your software vendor or service provider will protect your organization’s interests.